Chapter_21_Solutions

# Chapter_21_Solutions - Chapter 21 EXERCISE 21-12 (a)...

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Unformatted text preview: Chapter 21 EXERCISE 21-12 (a) Entries for Secada are as follows: 1/1/11 Building..............................................3,600,000 Cash................................................................ 3,600,000 12/31/11 Cash ................................................... 220,000 Rental Revenue........................................ 220,000 Depreciation Expense....................... 72,000 Accumulated Depreciation— Building (\$3,600,000 ÷ 50).................... 72,000 Property Tax Expense....................... 85,000 Insurance Expense............................ 10,000 Cash.......................................................... 95,000 (b) Entries for Ryker are as follows: 12/31/11 Rent Expense..................................... 220,000 Cash.......................................................... 220,000 (c) The real estate broker’s fee should be capitalized and amortized equally over the 10-year period. As a result, real estate fee expense of \$3,000 (\$30,000 ÷ 10) should be reported in each period. EXERCISE 21-2 (a) To Brecker, the lessee, this lease is a capital lease because the terms satisfy the following criteria: 1. The lease term is greater than 75% of the economic life of the leased asset; that is, the lease term is 83 1 / 3 % (50/60) of the economic life. 2. The present value of the minimum lease payments is greater than 90% of the fair value of the leased asset; that is, the present value of \$10,515 (see below) is 96% of the fair value of the leased asset: (b) The minimum lease payments in the case of a guaranteed residual value by the lessee include the guaranteed residual value. The present value therefore is: Monthly payment of \$250 for 50 months....................\$ 9,800 Residual value of \$1,180.............................................. 715 Present value of minimum lease payments...............\$10,515 (c) Leased Property Under Capital Leases............................... 10,515 Lease Liability............................................................................ 10,515 (d) Depreciation Expense............................................................. 186.70 Accumulated Depreciation—Capital Leases..................................................................................... 186.70 [(\$10,515 – \$1,180) ÷ 50 months = \$186.70] (e) Lease Liability.......................................................................... 144.85 Interest Expense (1% X \$10,515).......................................... 105.15 Cash............................................................................................ 250.00 EXERCISE 21-3 Capitalized amount of the lease: Yearly payment................................................................ \$90,000.00 Executory costs.............................................................. (3,088.14 ) Minimum annual lease payment..................................... \$86,911.86 Present value of minimum lease payments \$86,911.86 X 6.32825 = \$550,000.00 1/1/11 Leased Building Under Capital...
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## This note was uploaded on 03/01/2010 for the course ACCT 30801E taught by Professor Darland during the Spring '10 term at Buena Vista.

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Chapter_21_Solutions - Chapter 21 EXERCISE 21-12 (a)...

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